March 18 (Bloomberg) -- Fracking isn’t just for shale. In
Russia, producers are importing techniques from the U.S. to
squeeze billions of dollars of extra oil from Soviet-era fields.

TNK-BP, Russia’s third-largest producer, will use hydraulic
fracturing combined with horizontal drilling in almost half the
wells it sinks this year, a sixfold increase in just two years,
the company said. OAO Rosneft, OAO Lukoil and OAO Gazprom Neft
have similar plans.

So-called fracking, the process of blasting oil from rock
by injecting a mixture of water, sand and chemicals into wells,
has been used for years in Russia’s Siberian oil heartland to
stimulate production. What’s new is allying it with horizontal
drilling, turning the drill-bit 90 degrees to bore horizontally
to reach more oil-bearing rock. The pairing was perfected in the
U.S. to get economically viable flows out of shale deposits.
Used in Russia, producers are recovering 15 percent more crude
from aging deposits.

“This is a very big change in the way the company
approaches production that has literally happened in the last
year and a half,” said Gazprom Neft’s deputy chief executive
officer. “We have made breakthroughs.”

Enhancing production from decades-old fields is needed to
maintain Russia’s crude production above 10 million barrels a
day for a fourth year, a figure that surpasses Saudi Arabia and
the U.S., said Cliff Kupchan, an analyst at Eurasia Group. Apart
from the Russian state, which gets half its revenue from oil and
gas, the other winners are suppliers of people and equipment to
frack wells including Schlumberger Ltd., Weatherford
International Ltd. and C.A.T. Oil AG.

Enhanced Production

“Rosneft is becoming a more technologically advanced
company,” Igor Sechin, chief executive officer of Russia’s
largest producer, said in a speech in Houston this month.

State-controlled Rosneft will employ the technique at 50
wells this year at its largest production unit, up from just
three in 2012, according to a company presentation. Gazprom
Neft, the oil unit of Russia’s natural gas monopoly, will double
the number of wells where fracks are used this year.

Lukoil, Russia’s second-largest producer, plans to use
fracking in 55 horizontal wells over nine years to raise
projected production 15 percent at Urevskoye, a 60,000 barrel-a
day Siberian field that first started pumping in the 1970s, a
company presentation showed. The company expects to get an extra
35 million barrels from the field, valued at about $3.7 billion
based on today’s price for Russia’s benchmark grade.

‘Big Change’

“Everyone is now using horizontal wells and the
technologies paired with it like fracturing because that’s the
most straightforward way to maximize returns,” said Lev Snykov,
a partner at Greenwich Capital in Moscow.

Fracking allowed the exploitation of U.S. natural-gas
reserves the industry previously considered useless, elevating
America above Russia as the world’s largest producer of the
commodity. Horizontal drilling increases fracking’s
effectiveness by exposing more oil- and gas-bearing rock.

The process is now boosting U.S. oil production from so-called tight reservoirs in North Dakota and Texas. U.S. crude
oil production reached 7 million barrels a day in December, the
highest in 20 years, cutting the need for imports, according to
the U.S. Energy Information Administration.

President Putin

As American production gains, Russian President Vladimir
Putin has set a goal of maintaining production at more than 10
million barrels a day. Output, which reached a post-Soviet
record of 10.4 million barrels a day in September, will be
little changed this year or rise slightly, Deputy Prime Minister
for Energy Arkady Dvorkovich said in February.

To help postpone production declines at existing fields,
oil services companies are exporting expertise to Russia.
Houston-based Schlumberger, the world’s largest oilfield-services provider, is vying with U.S. rivals such as Weatherford
and Russian operators led by C.A.T. Oil.

Schlumberger has 12 separate fracturing fleets -- the
combination of machines and people needed for fracking --working
in Russia, a company executive said. C.A.T., which says it has a
market-leading share of 31 percent, has 15.

The boom in horizontal wells will cause the number of
meters drilled every year to increase at least 40 percent by the
end of the decade, according to research from Renaissance
Capital.

“Russia under Putin is committed to maintaining production
levels,” Eurasia’s Kupchan said by e-mail from New York.
Companies like “Rosneft will be drilling and subcontracting
unless the oil price really bottoms out.”

Growing Fast

The market is growing fast. Lukoil didn’t use fracking in a
horizontal well in Siberia until 2011, a company official said.
Since then it’s undertaken 215 such wells, adding about 19
million barrels of production. Lukoil plans fracking in 450
horizontal wells over the next three years.

TNK-BP, which is being acquired by Rosneft, plans 102
horizontal wells with fracking this year, double last year’s
number and almost half of all the wells it’s drilling, the
company’s press service said.

In time, fracking and horizontal drilling in Russia will
spread from rejuvenating older fields to developing
unconventional reserves.

The Bazhenov shale, a layer of rock the size of France that
lies underneath Siberia’s producing fields, may hold more oil
than Saudi Arabia, according to Russia’s subsoil agency. The
geology is similar to North Dakota’s Bakken shale, where
production has more than doubled in two years to 700,000 barrels
a day, data compiled by Bloomberg show.

Gazprom Neft and partner Royal Dutch Shell Plc will spend
$200 million over the next three years in the Salym area of the
Bazhenov, according to the Russian company. Exxon Mobil Corp.
and Rosneft also plan to explore the area.

Of Russia’s three big energy companies, Gazprom has
performed the best during the past three months, gaining about 2
percent in Moscow trading, beating the 1.6 percent decline of
the benchmark Micex index. Lukoil shares have lost about 2.1
percent in the period, while Rosneft dropped 9.6 percent.